"A key metric for direct sellers is active representative growth," said Ken Wasik, director of the consumer products group at Houlihan Lokey, an investment bank. "That's one of the first things analysts look at. It drives volume. If Avon is having trouble recruiting more representatives it may suggest difficulties for others, too."

The global cosmetics company said third-quarter income jumped by a third, but continued sluggishness in Avon's critical U.S. market and a downgrade by Deutsche Bank to "hold" triggered a sell-off.

Although Avon's earnings of 37 cents a share exceeded the Thomson First Call consensus estimate by 3 cents, 11 percent sales growth to $1.78 billion fell short of expectations. Analysts had predicted sales of $1.8 billion in the quarter.

Moreover, it was the cause of the revenue shortfall that spooked investors.

"Despite numerous excuses and outsized spending behind new initiatives, the U.S. business continues to show weakness," said analyst Andrew Shore in a research note. "Representatives growth is slowing to unacceptable levels and new launches have been abysmal."

Avon added that the series of hurricanes that hit the South and Southeast also slowed recruitment of new representatives.

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